On Tuesday, April 19, 2005, Northrop Grumman Chairman, CEO and President Ronald D. Sugar addressed the Economic Club of New York on the interplay of commercial technology and national security.Below are his delivered remarks.

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The Interplay of Commercial Technology and National Security

My thanks to everyone here at the Economic Club of New York for your kind invitation to share some ideas with you tonight. I truly appreciate the opportunity you've provided to meet so many business leaders and share this evening's program with someone I respect as much as John Chambers. It's tough to follow John, so I'm really relieved to precede him.

Let me now take you to the frontlines of the Global War on Terror to highlight how computers – more specifically, computer networks – are transforming national security.

For the soldier in combat, there are three fundamental questions that he must be able to answer at all times. Where am I? Where are my buddies? Where is the enemy? With that information he can make the right decisions to carry out his mission.

Not long ago, determining "Where am I?" meant using a map and compass and trusting one's map reading and navigational skills. Picture a second lieutenant leading a patrol through a dense swamp, at midnight, in a driving rain, and trying to determine his exact location on a 20-year-old map.

Today, the advent of the Global Positioning System (or "GPS") satellite communications and robust computer networks have led to a digital battlefield command system and a capability called Blue Force Tracking. Equipped military units have a GPS receiver to constantly track their position. Satellite uplinks eliminate line-of-sight communications breaks. And a tactical Internet connects everyone to a common network, even allowing text messaging.

On a ruggedized hand-held device, that second lieutenant can know within 10 meters where he is. He sees blue icons and knows immediately where all other friendly forces in his sector are located. He sees red icons and knows where the enemy may be lurking.

That same information is available to the squad leader, the brigade commander and the top decision-makers in the Pentagon. They can change the view and add content to see a larger picture of the battlefield. In other words, each leader at every level gets the information they need to do their job.

Where am I? Where are my buddies? Where is the enemy? Questions answered. As my friends at Cisco might say, "That's the power of the network."

Northrop Grumman makes the Blue Force Tracking system for the U.S. Army and I share this anecdote with you as a way to introduce the main points of my remarks. I'll call them "spin-off," "spin-on" and "twin-spin." First, I will briefly touch on "spin-off" – the old concept that the government funded military research and development projects to create innovations that may also be "spun off" and find application in commercial markets.

Second, is the more recent dynamic of "spin-on" – where the information revolution sparked innovations in the commercial world that have spun back on to government and military programs. These innovations have fundamentally changed how modern warfare is conducted and how defense contractors produce their products.

And finally, what I believe is the future path we're on – I'll call it "twin-spin" – where innovations will now travel more readily and rapidly back and forth between the commercial and government worlds to the benefit of both.

These three concepts serve to explain the remarkable transformation of my own company, Northrop Grumman, which has become, during the post-Cold War era, one of the largest and best positioned of all defense contractors.

They also serve to illustrate the special relationship between such seemingly different companies as Northrop Grumman and Cisco. It's a relationship well known to John and myself, but perhaps not as readily apparent to outsiders.

Most significantly, however, the dynamic of "twin-spin" is more than just good business or good government; it's the imperative for our future success in the war on terror and for effective homeland security.

So first, in talking about "spin-offs," let's start with the leading example, the space race.

Some remember the space race as an ideological battle – an opportunity to prove that a free, democratic society could accomplish a great task more quickly and efficiently than a closed, authoritarian regime.

Others celebrate the scientific journey and say that that was reward enough. We conquered seemingly impossible technical hurdles to achieve President Kennedy's vision of placing a man on the moon and returning him safely to the earth. In the process, we added dramatically to our core knowledge of the earth sciences and of our universe.

Equally impressive to those achievements were the many lasting ways American lives were touched by the technologies developed for space exploration. For example:

  • Digital signal-processing techniques, originally developed to computer-enhance pictures of the Moon for the Apollo program, are at the core of computer-aided tomography – CAT scans – and Magnetic Resonance Imaging – MRIs – both now used in hospitals worldwide;
  • Kidney dialysis machines were the result of a NASA-developed chemical process that could remove toxic waste from used dialysis fluid;
  • And, portable, self-contained power tools were originally developed to help Apollo astronauts drill for moon samples. Back on Earth, this technology has led to the development of cordless power tools and appliances.

From athletic shoes to firefighter equipment, from ski boots to joystick controllers, from smoke detectors to water purification systems, and don't forget the powdered orange beverage "Tang." The list goes on and on. Since 1976, about 1,400 documented NASA technologies have benefited U.S. industry, improved our quality of life and created jobs for Americans.

With NASA poised to launch a new era of space exploration with missions to the Moon and Mars, we may be on the cusp of another influx of technologies that will have broad impacts on society.

"Spin-off" technologies were not limited to NASA and space programs. Military requirements have also pushed the state of the art and resulted in new, commercially viable technologies and products. Advanced composite materials, semiconductors, radar, infrared sensors, and structured software development all originated – or received significant boosts critical to their development – from military spending.

Perhaps the most significant "spin-off" of that era was the Defense Advanced Research Project Agency's "ARPA-Net," this is what launched the Internet. And once the Internet's development left the confines of government and university labs and reached the wide-open spaces of the commercial world, it flourished. In fact, it flourished to the point that the Internet would later "spin-on," that's spin back to the defense industry, and trigger the current transformation in military thought of how future wars would be fought.

Following the end of the Cold War, the military and its industrial base contracted dramatically during the 1990s. At the same time, the information technology sector boomed with new ideas and new products. Of the information revolution's many far-reaching impacts, the most significant impact was that IT became the essential component of our military's new transformation.

I think every American would agree that those whom we send in harm's way deserve every possible advantage we can give them. And, aside from the sheer bravery, skill and decency of our highly trained forces, our nation's greatest strength is its technological know-how.

As illustrated by the Blue Force Tracking example I mentioned earlier, the miniaturization of key technologies, the advent of ever more powerful software and computer processors, and the advances in communications technologies have made a dramatic difference. These "spin-on" innovations have enabled our military to conduct battlefield operations with unprecedented efficiency. Space, air, ground and sea-based platforms are now being linked into robust networks that give our fighting forces an overwhelming advantage in conventional warfare.

These breakthroughs were, in fact, spawned by the commercial sector, because the pace of commercial progress surpassed that of the defense sector. Incorporating these and future breakthroughs into military systems, and even more profoundly, into military doctrine and training, is essential if we are to maintain our advantage on the battlefield.

While the military and, in fact, all of government, was recalibrating its plans and assumptions initiated by the information revolution, Northrop Grumman was, too. At the end of the Cold War, Northrop Grumman was a $5 billion military airplane company with the majority of its revenue tied to a single program, the B-2 bomber. But we saw an opportunity in the changes sure to come from the new geopolitical picture and the influx of breakthrough technologies.

We recognized that America's future security needs would depend on capabilities such as information dominance, precision strike with smart weapons, persistent global surveillance, and missile defense. We then launched a decade-long merger and acquisition program to strategically align the company with the Defense Department's future needs.

We anticipated the broad impact technology advances would have on our industry and on our government customer, and executed a business strategy to bring in the right capabilities at the right price. Today, we're a $30 billion company with more than 125,000 employees and an exceptional portfolio of businesses that give credence to our company tagline of "defining the future." In fact, today, one-third of our business comes from information technology-related programs.

The information revolution changed the rules of the game. Had we been unable to find a way to bring in the best commercial technologies and incorporate them as solutions for our government customers, we would have been out of the game.

This brings me to where we may be headed in the future -- the notion that we are moving beyond the "spin-on" model to something new. Something I will call "twin-spin."

Everyone here understands all too well the profound impact the atrocities of 9-11 had on our country. The subsequent years have seen a variety of actions taken as part of this new war on terror. I would suggest to you that one of the most important steps we can take is to encourage the rapid two-way flow of innovation between the commercial and government worlds.

What's possible when we take the leading technologies, regardless of their point of origin, and apply them to homeland security challenges? I'll give you an example. Consider a system Northrop Grumman has formulated, called " VISTA" [VIS2TA].

Imagine an urban landscape with a proliferation of low-cost sensors that can detect the presence of explosives, as well as radiological, chemical, or biological weapons. In the case of a chemical weapons release, special stand-off infrared sensors identify the poisonous vapor. The network's computer brain uses wind and temperature data to predict the path of the deadly cloud. A reverse-911 system provides direct telephone warning to every apartment, home and office building in the cloud's path. Traffic lights automatically route cars away from the danger zone. First responders and emergency personnel receive a detailed picture of the impacted area with the information needed to make immediate decisions, well before they arrive on the scene.

The technologies to do this exist today, and the benefits could not only apply to terrorist attacks, but also to day-to-day operations, or in response to natural disasters. We have now reached a point in the information revolution where intelligent networks can create a web of even greater safety and security for our citizens. While VIS2TA is still a concept, there are other activities we have underway helping to meet vital homeland security needs. For example:

  • We are building a highly secure data network for the U.S. Department of Homeland Security to securely connect its 22 disparate agencies;
  • We are deploying biohazard detection systems into post offices around the country, to ensure the safety of the U.S. mail;
  • And we are testing infrared countermeasures developed for military aircraft to protect commercial airliners from shoulder-fired missile attacks.

And in the spirit of "twin-spin," we see applications of new secure networks and software to improve the protection of financial data exchanges from would-be cyber-terrorists.

The ability to recognize threats; identify and respond to cyber-attacks; and ensure the integrity of existing data are critical concerns of ours. I believe the unique capabilities we and others in the defense world have in this area will migrate to the commercial arena. And, the sooner, the better.

So let me conclude my odyssey from "spin-off" to "spin-on" to "twin-spin," by emphasizing that I see much progress being made. The Department of Defense and its unique industrial base will continue to innovate to meet future national security needs. But by far, more of those necessary innovations will certainly come from the commercial world. Partnerships between government contractors and traditionally commercial companies will continue to serve as a bridge for those innovations. That's why close relationships between companies such as Northrop Grumman and Cisco are so important for both business and for national security as well.

Northrop Grumman stays highly informed on technical advances at Cisco and other commercial companies, to ensure that we find the right solution for a specific military need. The government gets a commercially competitive price for the Cisco products we pull through. And Cisco gains an advance look at the future needs of the U.S. government, which happens to be the largest single consumer of IT products and services on the planet.

For all of us, advancing national – indeed, global – security is a shared goal, and that translates into more stable financial markets, more opportunities for economic growth, and increasing consumer confidence in the future.